The financial supervisory authorities announced amendments to the "Detailed Regulations for the Supervision of Insurance Business" to reflect the "Enhanced Actuarial Supervision Framework for the Insurance Industry" announced on January 20, 2026 (link). The amendment is intended to strengthen insurers' autonomous risk management by introducing a K-ICS internal model approval system and a mandatory Own Risk and Solvency Assessment (ORSA) framework. The key details are as follows.
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1.
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K-ICS Internal Model Approval System
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Insurers will be able to calculate required capital under K-ICS using internally developed models in addition to the standard model prescribed by the Financial Supervisory Service.
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The approval process for internal models consists of:
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①
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preliminary consultation with the supervisory authority;
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②
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submission of an application;
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③
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review of compliance with the approval criteria; and
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Insurers applying an internal model must, from the preceding fiscal year, calculate required capital using both the standard model and the internal model in parallel and report both results to the supervisory authority on a quarterly basis.
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The approval criteria include whether:
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①
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the insurer has actually used the internal model in key business decisions, such as business planning and product development;
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②
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the model appropriately estimates the distribution of the net asset value reflecting its risk profile and uses accurate and complete data;
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③
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the insurer has a framework for regularly and independently validating the internal model results; and
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④
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the entire process of model design, operation, calculation, and validation is systematically documented.
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2.
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Mandatory ORSA framework
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The ORSA framework (requiring insurers to identify their own material risks and independently assess and manage their solvency), previously operated as a formality, will become mandatory.
- However, implementation may be deferred for (i) insurers with annual written premiums of KRW 500 billion or less and (ii) Korean branches of foreign insurers.
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To strengthen the effectiveness of ORSA, the board of directors and senior management will be responsible for operating ORSA and for the assessment results, and those results should be used in business planning and other management activities.
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To enhance the reliability of ORSA, insurers must obtain validation of the framework from (i) an independent third party (either an internal audit department or an external independent organization) and (ii) the supervisory authority.
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The foregoing amendments are, in principle, to apply beginning with the financial statements for the second quarter of this year, with the exception of certain provisions which are scheduled to take effect from the end of 2026, in consideration of the insurance industry’s preparation period.
[Korean Version]
